The Court of Appeal held last year that a consultant trauma and orthopaedic surgeon could pursue his claim for substantial future loss of income resulting from a breach of his employment contract, related to his employer’s failure to follow its contractual disciplinary procedure
This article was originally published on 8 February 2011 and is not updated.
Since this article was published, the employer appealed to the Supreme Court. The Supreme Court overturned the decision of the Court of Appeal.
XpertHR provides up-to-date guidance on disciplinary procedures.
The decision, in Edwards v Chesterfield Royal Hospital NHS Foundation Trust  EWCA Civ 571, enabled Mr Edwards to claim damages that are not limited to his notice period or the time it would have taken for the employer to carry out its contractual disciplinary procedure. Permission for the employer to appeal to the Supreme Court has been granted and the hearing is listed for 22 June 2011.
So what should employers do about their disciplinary procedures? Are they now at risk of high value claims from employees they dismiss if they do not follow their own disciplinary procedures?
The key factor in the Edwards case was that his employer’s disciplinary procedure was contractual. As a result, when his employer failed to follow that procedure it breached its contractual obligations towards Mr Edwards, which led him to bring his claim for substantial damages as a result of the breach. Mr Edwards’ claim could never have succeeded if the disciplinary procedure had not been contractual.
Contractual disciplinary procedures serve to restrict the employer’s ability to deal with a disciplinary matter based on the circumstances of the situation. Most importantly, by making procedures contractual, employers risk facing claims for breach of contract if they do not follow those procedures. If the breach is sufficiently serious, this opens the door for employees like Mr Edwards to argue that they would not have been dismissed “but for” the breach (minor technical breaches are unlikely to permit successful claims for future loss of earnings in any event) and claim for losses arising from this breach.
Minimising the risk
In most cases where an employer has a disciplinary process in place, it will go through the same process or at least certain aspects of it each time, regardless of whether or not it is expressed to be contractual. For example, it will carry out an investigation, undertake interviews and convene meetings with the witnesses and the alleged offender. Following this process, the employer will make a decision, against which the employee can appeal. Typically, if flexibility is needed it will be in relation to the timing of each of these stages, not with these core elements of the process. Therefore, in the absence of clearer wording, there may be a risk that aspects of the disciplinary process may be found to be contractual as a matter of custom and practice, simply by virtue of being implemented in the same manner year on year. In order to minimise this risk, employers should include clear language expressly stating that its disciplinary procedure shall not be contractual.
Contractual disciplinary procedures
Our advice to employers is to keep the procedures non-contractual as this will present a major obstacle to an employee seeking to bring a claim for substantial damages for loss of future earnings in circumstances like those of Mr Edwards. The employee would have to establish that the procedure had become contractual by custom and practice.
If Mr Edwards’ claim is successful, he will likely recover a very significant sum from his former employer. One point that distinguishes Mr Edwards’ case and may give employers some measure of comfort (in certain industries) is that his future career prospects are seemingly limited because the NHS is a national organisation with control over a substantial proportion of the employment market. In other sectors, the employee is likely to be better able to mitigate his or her losses by finding new employment.
So does the Edwards case change what employers should do when dealing with disciplinary dismissals? No. Whether contractual or non-contractual, employers need to follow the core elements of their disciplinary procedures in all but exceptional cases. There can be no claim for breach of contract where the alleged obligation is non-contractual. Similarly, no such claim is possible where there is no breach.
Dan Peyton, partner, and Doug Styles, senior associate, McGuireWoods, London.